Brunei's Local News - Brudirect.com

Bandar Seri Begawan - Islamic banking has been proposed as an alternative financing method following the global financial crisis.

Director of Financial Institutions, Ministry of Finance, Hajah Rosni Haji Tungkat, said that risk mitigation is the fundamental difference between the Islamic and conventional modes of banking.

However, she noted that even though the inherent weakness in the modes of financing in conventional banking instruments and institutions was evident during the crisis, Islamic instruments are also not immune to the risks.

Hajah Rosni was speaking as the guest of honor at the opening ceremony of the two-day Workshop on Risk Management and Corporate Governance organized by the Ministry of Finance in cooperation with the Islamic Financial Services

Board (IFSB) and held at the Sheraton Hotel yesterday.

Hajah Rosni said the global and far-reaching dimensions of the crisis have provoked much thought on alternative financing methods for the public, where the virtues of Islamic banking can be hailed.

"The rigid discipline of Islamic banking practiced in its purest form will surely surface today as a sustainable alternative if we all work through own institutions and through the IFSB to bring Islamic banking on par with conventional banking and create the necessary infrastructure to meet the goals of acceptability by the non-Islamic public as well," she said.

Haiah Rosni highlighted the importance of Sharia-compliant financial innovation in catering to the needs of conventional bankers and the investing public, which will help integrate Islamic financial services into the global financial markets.

The current global financial crisis has put more emphasis on the importance of sound risk management systems and good corporate governance in financial institutions.

Hajah Rosni said the obvious call from the crisis is that risk assessment strategies should not only be based on quantitative, mathematical models, but more importantly on the reality in the Market place.

She said the ever-changing climate of the banking industry demands a better understanding among the risk managers about the associated risks with complex and often incomprehensible financial instruments.

"The US sub-prime crisis is a wake-up call to all risk managers to feel the pulse in the real sector, which was largely ignored by the assumptions made both by risk managers and by rating agencies," said Hajah Rosni.

She said good corporate governance requires the board of directors and the senior executive management of financial institutions to take ownership of the financial innovations of their respective institution.

"They need to better understand the risks that their institutions are exposed to and ensure that the instruments cater to the market they are targeting," she said.

Hajah Rosni highlighted the experiences of the investing public in a number of countries, especially those who are old and unsophisticated, who have been literally taken for a ride by relationship managers, aggressively selling financial products, which they themselves did not fully comprehend.

"We must ensure that this does not happen in our markets and that the confidence of the investing and depositing public is not eroded," she said.

Meanwhile, Assistant Secretary General of IFSB, Awang Abdullah Haron, said that workshop aimed to provide a platform for the participants to get practical explanation of the IFSB standards and give feedbacks on the operational issues and challenges facing the industry in implementing the standards.

Awang Abdullah said the workshop was held to determine improvements that need to be carried out to further enhance the effectiveness of the IFSB standards.

Based in Kuala Lumpur, IFSB is an international-standard setting organization for the Islamic financial services industry (IFSI).

IFSB promotes the soundness and stability of the IFSI by developing new or adapting existing international standards consistent with Shari at principles and recommending them for adoption and implementation. -- Courtesy of Borneo Bulletin